Rental Property Investor · Dayton, OH · Member since 2016 · 210 posts · 160 votes
I Am looking to invest in property that will not be my primary home. I know an LLC is the safe way to go. My question is, should an Attorney be sought to create the LLC?. I saw an Attorney and if I move forward the cost is about 5,000. I have other people who said there is no need and that I should be able to do it myself for about 1,000.00
Wholesaler · Prescott, AZ · Member since 2016 · 15 posts · 11 votes
10y
Sorry, did not include this as well. You didn't say what type of real estate you wanted to do.
An LLC should be used as a buy and hold.
An LLC with an "S corp" election should be used for wholesaling and rehabbing homes. "S corp" election from an LLC is a LOT less paperwork... literally only adds one paper to your normal LLC that get sent to the IRS.
Contact a CPA for specifics and advice. Most states don't require a lawyer for any of this... Just some one with google and an intuitive mind ;)
Investor · Little Rock, AR · Member since 2014 · 10 posts · 6 votes
10y
Courtney Jones I don't know how they do it in Oregon but $5000 sounds way overpriced. I would suggest using Google to find out your city or county's rules and process for establishing an LLC. A lot of times they have a website with the forms you need to complete and the cost to register the LLC. Tell the attorney trying to rip you off 'good bye'!
Real Estate Agent · San Francisco Bay Area · Member since 2015 · 18 posts · 4 votes
10y
That seems way overpriced! I used legal zoom and purchased an LLC for a franchise I currently own and paid $500. They have great customer support and guide you step by step through the process. I would check out other resources if I were you.
Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes
10y
I second what @Jamie Oie said. I use LegalZoom for my LLC and for all my dba's. They are prices well and you have legal support. $5000 is outrageous for an LLC. If you do it yourself it should only cost a few hundred dollars.
Wholesaler · Prescott, AZ · Member since 2016 · 15 posts · 11 votes
10y
I don't know about Oregon but to make one in Arizona it costs about 200 to do everything yourself. I payed $2000 for my first LLC but that was for an entity company to establish everything and send me books with all of the necessary paperwork along with a class on what it was all worth and doing. The problem is there is no standard for any of this... Doing it yourself the first time you run the risk of having this LLC preventing any of the protection really being enacted. You use them to cover you on liability risks as well as tax benefits so having the right papers and people in place plays an important role. For your first it could be worth it to pay a little more if they will cover EVERYTHING and go over it with you... so in the cases that you will need more it will be an understood method and won't be such a pricey endeavor.
In any manor $5000 is way too much for something that financially costs them almost nothing. Do a little research in your area and I'm sure you can find a much better offer.
Wholesaler · Prescott, AZ · Member since 2016 · 15 posts · 11 votes
10y
Sorry, did not include this as well. You didn't say what type of real estate you wanted to do.
An LLC should be used as a buy and hold.
An LLC with an "S corp" election should be used for wholesaling and rehabbing homes. "S corp" election from an LLC is a LOT less paperwork... literally only adds one paper to your normal LLC that get sent to the IRS.
Contact a CPA for specifics and advice. Most states don't require a lawyer for any of this... Just some one with google and an intuitive mind ;)
Real Estate Professional · Dayton, OH · Member since 2015 · 423 posts · 187 votes
10y
That's a question for LegalShield. If you aren't a Legal Shield member already, I recommend signing up. I'm sure you can find an ad for it in Marketplace.
I'm a member, and for less than $300 a year, you pretty much get unlimited legal advice on issues like you pose here. It includes a will. It includes representation for any traffic violations. You get a discount on any legal work done that goes beyond the initial consultation.
I've always formed my own LLC's. The cost of filing the paperwork in my state is $125, and it's not complicated. Not sure about Oregon, but $5,000 seems like a gouge. The rules in Oregon are a question for LegalShield.
Investor · West Linn, OR · Member since 2015 · 100 posts · 58 votes
10y
@Courtney Jones Here in Oregon, the filing is $100 plus any additional paperwork you want to do beyond the minimum. The state automatically creates a generic operating agreement that you can use for the basics such as getting a business checking account. I don't suggest this as it leaves way too many gaps and "gray/grey" areas if your goal is asset protection. You're going to want more decisions documented. I went down this route myself several years ago but have since had that business corrected and use the attorney for all entity related items.
$5k is way too much. You should't be over $1k for the first and then if you use that same attorney and setup future, like entities, each subsequent should be a lot cheaper. The law office I us is also my registered agent service, which or course, you don't get when you do it yourself, you're on your own.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
Business purpose (B&H? Flip? Wholesale? or?) and asset type (commercial or residential) would drive my decision. If just a little rental house I was getting a loan on, I would rather own in my own name with good insurance than transfer it out to my LLC later. Causes too many potential problems with title insurance, hazard insurance, DOS clauses. I hold my commercial (5+ unit) apts in LLCs. Not an attorney or tax person, just what I have done effectively so far.
Please expand on what you are going to buy and do @Courtney Jones. An LLC may not be what you need at all.
Attorney · Winchester, VA · Member since 2015 · 726 posts · 387 votes
10y
I do not recommend LegalZoom. Many in our profession affectionately refer to the service as "legaldoom" for a variety of reasons. The documents are not necessarily going to match your needs, and [in my opinion] it doesn't offer the same level of personal dialogue and determination as having your own attorney.
That said, I think that $5,000 is a bit steep for a simple incorporation. You should probably shop around.
Investor · West Linn, OR · Member since 2015 · 100 posts · 58 votes
10y
@Mark Creason That's correct, she would be on her own for that responsibility or pay for a 3rd party service. Just like setting the entity up initially, she could choose to do things herself or get help. Personal choice
Lender · Dayton, OH · Member since 2008 · 1k+ posts · 705 votes
10y
State filing fees will vary. Beyond that
A single member entity is simple, and should be very inexpensive. Literally a fill in the blank form will generally cover it.
A multimember entity can be much more complex, and will cost more. You will want an attorney that does a lot of business and entity work. Even with the extra time, 5000 is very high.
Rental Property Investor · Astoria, OR · Member since 2015 · 8 posts · 3 votes
10y
It's really easy to do yourself if you go to the Secretary of State web page. I think the filing fee is $150. Per the comments above though you should verify that a single member LLC will actually provide the protection you desire.
Thanks for asking and addressing a concern that many newbie are faced at the beginning of REI. We have decided to research LegalZoom and thus far, the process has been simple and inexpensive. However, as we grow our business and I am sure, we will keep evolving to other resources in an effort to protect our assets.
Real Estate Investor · Milton, WI · Member since 2015 · 52 posts · 14 votes
10y
For me to file an LLC online in Wisconsin is only $130. Do you have any partners that you would need a shareholders agreement or any other docs that the attorney thinks you need? Also I do pay my attorney to do some due diligence on my properties and he does help with the closing documents - this can be costly but is well worht the investment.
Investor · Carson City, NV · Member since 2016 · 10 posts · 0 votes
10y
We've set up our LLC through LegalZoom. That said, I wouldn't consider LZ a substitute for the advice of my CPA (experienced in REI) or a real estate attorney. I'd love a referral for a good real estate attorney in the Reno area.
Boston, MA · Member since 2015 · 93 posts · 32 votes
10y
Yes, as many have said here, this should not be a multiple-thousand-dollar transaction on your part. In MA, you just have to pay $500 and fill out a one-pager on the website of the Secretary of the Commonwealth. And from the looks of the responses, this state is on the higher end for that.
Do the LegalZoom users - @Peggy Borgman, @Jamie Oie, @Simon Shih, and anyone - recommend to utilize that rather than just filling out the form yourself? Did you guys create any operating agreement or articles of incorporation with the LLC or did you just create the entity and that suffices? Thanks!
Rental Property Investor · Dayton, OH · Member since 2016 · 210 posts · 160 votes
10y
I just got in from the office to all of your replies. Thank you so much for yur feedback and insight. First Thank you Latasia Rose- I was thinking that $5,000 for the LLC was over priced but I had nothing to compare that too. Peggy Bergman,nancy Eminth ,Simon Shih,Jamie Oie- I see you all have thoughts on Legal Zoom. I had not considered them. I see Legal zoom was also mentioned by Rod Yarger, Matthew Kreitzer. I dont think I have the confidence to try these forms on my own. I would hate to be worried if i made a mistake that was going to cost me dearly. Mark Cresor, you said I could be my own agent. I am not sure what you meant by that if you meant anything other than doing the LLc paper work myself. Steven Vaugh, I am planning to buy and Hold property. Not interested in a turn around. Brian Ballard I am unfamiliar with what an S corp is. @ Darrin Carey I am looking for a Multiple member entity with one possible 2 other people in the LLC. @Kory Thaut, thank you for the approximate dollar amount. It gives me something to shop around for. Ian Elstrom-thank you for the information on the secretary of state web page and the link. You guys are awesome.
Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes
10y
@Francisco Feliz. My wife did her LLC on her own and filled out the paperwork, but she also has a legal background. The only real benefit is a cover your *** legally thing.
I also have incorporated with my wife as partners and we used LegalZoom for that. It was a little outside our realm of our comfort zone.
My person opinion is to spend a little more on LegalZoom to cover yourself legally. can you do it yourself? Yes, but do you want to chance doing something wrong?
Real Estate Agent · San Francisco Bay Area · Member since 2015 · 18 posts · 4 votes
10y
@Francisco Feliz yes you can totally do it yourself but I recommend spending a little extra to ensure its all done correctly and you can get support at any time from them. Not to mention they send you a very professional looking case for all your documents with your LLC engraved ;)
I just got in from the office to all of your replies. Thank you so much for yur feedback and insight. First Thank you Latasia Rose- I was thinking that $5,000 for the LLC was over priced but I had nothing to compare that too. Peggy Bergman,nancy Eminth ,Simon Shih,Jamie Oie- I see you all have thoughts on Legal Zoom. I had not considered them. I see Legal zoom was also mentioned by Rod Yarger, Matthew Kreitzer. I dont think I have the confidence to try these forms on my own. I would hate to be worried if i made a mistake that was going to cost me dearly. Mark Cresor, you said I could be my own agent. I am not sure what you meant by that if you meant anything other than doing the LLc paper work myself. Steven Vaugh, I am planning to buy and Hold property. Not interested in a turn around. Brian Ballard I am unfamiliar with what an S corp is. @ Darrin Carey I am looking for a Multiple member entity with one possible 2 other people in the LLC. @Kory Thaut, thank you for the approximate dollar amount. It gives me something to shop around for. Ian Elstrom-thank you for the information on the secretary of state web page and the link. You guys are awesome.
Courtney,
Disclaimer - I am NOT an attorney, and like everyone else, my advice is worth exactly what you are paying for it. Even if you decide to go the LZ route, I recommend you at least look at the state website. The paperwork and process is way easier than you might expect, and almost everything is boilerplate. That said, I've used LZ in the past and had a good experience. They'll guide you through the process and make sure the proper forms are filed; just don't expect more. Re the Agent - most states (possibly all) require you to name someone physically inside the state who can be served papers if someone wants to sue you. That's usually you if you live in state, or you can hire someone to act on your behalf. Hiring an agent is fairly inexpensive because they rarely have to do anything. Re: the S Corp. This is just a tax election. An S Corp (technically called a Subchapter S Corporation) pays no taxes itself. All the profits and losses simply flow to the LLC members (you) and you pay the taxes on your personal return.
Rental Property Investor · Dayton, OH · Member since 2016 · 210 posts · 160 votes
10y
Thank you Jerry. i appreciate your input.Good to know about the S corp. Yes, not planning to do the paperwork myself. Good to see whats required though. I can see research is key.
Investor · Panama City, FL · Member since 2015 · 378 posts · 183 votes
10y
No! Stop! never ever put your primary residence in an LLC. When you sell your home if there is a gain you will not have to pay capital gains tax on your primary residence in your personal name, but you may owe tax if you put it in an LLC. Also you can't avoid personal liability with an LLC. In other words if you are driving a car that is in the name of an LLC and you run over someone they can still sue you because your the one driving the car. Further most states give lower property taxes on your primar home and most states have laws protecting your home from law suits up to certain limitations. Google "OJ Simpson home judgement proof"